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Motley Fool Credit Card Philosophy and Ratings Criteria

We believe Fools should do their homework when making any financial
decision, including to better understand our credit card philosophy and
ratings criteria.

Foolish Credit Card Philosophy

With that in mind here’s a rundown of what we think is crucial when managing credit card spending:

Spending on “needs” vs. “wants” – Staring down a pile of credit card debt can be downright scary, especially when credit cards charge interest at sky-high rates. Which is why we think most cardholders should prudently use credit for necessities and avoid non-chalantly whipping out plastic for impulse purchases, especially for cardholders building their credit histories.

Find Swiss-army knife style credit cards – Focus on credit cards that are a fit the majority of your needs rather than packing your wallet with cards for every major and niche spending category. For example, with cash back cards, find a cash back card with a high base rate for the majority of purchases and, perhaps, one additional card that pays bonus cash back in a specialty category that’s a meaningful portion of a budget. Carrying additional cards to optimize rewards across other smaller spending categories likely won’t deliver an acceptable return on time.

Use balance transfers to pay down debt – Taking advantage of 0% introductory APR offers on balance transfers can help chip away at debt balances faster. In fact, paying down a $5,000 balance over 21 months will cost a whopping $825 in interest charges at an 18% APR. Pocket the savings instead with a 0% introductory APR balance transfer credit card.

When carrying debt balances – Cardholders carrying debt balances month-to-month will incur interest charges, many times, at high, double-digit rates. Which is why we think cardholders will be worse off when running up debt balances on a cash back or travel card for the sake of earning rewards at far lower, single-digit rates. That’s a recipe for destroying wealth, not helping to build it.

Grab your free FICO Score – Many major credit card companies now offer cardholders free access to their FICO Scores as a perk. Take full advantage! Why? Because myFICO charges upwards of $350 annually to receive, track and monitor your comprehensive credit history. That three-digit number representing your creditworthiness can mean the difference between falling behind and beating your financial goals.

Credit card debt and investing – We Fools are born and bred investors. And we know one of the single, most impactful ways to build your wealth starts with nailing down a plan, sticking to it, and then investing your savings. Building wealth is equally about saving money as it is about generating good investment returns. Credit cards are one of the many financial tools you have at your disposal to surpass your long-term goals, including to spend wisely, pay down debt, earn some extra cash, and build your wealth by investing.

Credit Card Ratings Methodology

Quick fact: You could apply for one different credit card per day and it would take over 4.6 years to finally hit every card offer available in the U.S.

Which is why we’ve vetted some of the most popular offers on the market to help Fools cut through the noise and find what could be their ideal credit cards. So let’s dive in to understand the four equally weighted pillars of our ratings philosophy and how we narrow down the pile of offers to what we think are the best credit cards on the market.

Fees – Ratings will be biased toward credit cards with compelling offers to reduce out-of-pocket fees, including the three following common fees:

Annual fees

Balance transfer fees

Foreign transaction fees

APR’s – Due to the large impact APRs have on a cardholders ability to pay down debt, our ratings will favor cards with compelling APR offers, including the following:

Published purchase APR range

Presence of 0% introductory APR for balance transfers

Length of 0% introductory APR for balance transfers

Presence of 0% introductory APR for new purchases

Length of 0% introductory APR for new purchases

Sign-up bonus, cash back and rewards programs – A credit cards sign-up bonus and rewards program is assessed with a focus on convenience, as well as balancing flexible redemption options with a high rewards rates. Ratings criteria includes the following:

Presence of a sign-up bonus offer, size, and required qualifications

Cash back and rewards earnings rates

How a cards rewards program incentivizes spending on needs vs wants

Flexibility of redemption options, including minimum thresholds

Are cardholders required to manually opt in to bonus categories or are rewards “always on” and more convenient?

Quality of cardholder perks – Competition among credit card companies is fierce and each is willing to battle for new cardholders by packing cards with valuable features. Accordingly, a suite of credit card perks should be expected and our editorial opinion accounts for the presence and quality of each credit cards additional features, including the following:

Presence of free FICO Score

Suite of non-essential perks, including concierge services, price monitoring, ID theft, and late payment assistance, to name a few.

Note: Cardholders comparing our ratings to others may find ours to be different. Our ratings attempt to reflect the needs of the majority of U.S. credit card users, who use credit modestly and are seeking high-quality credit card solutions for their primary needs. Cardholders stretching their rewards via travel redemption tactics and those optimizing cash back across many niche cards and bonus spending categories may find our ratings differ from others for the same credit card offers.

The above factors are our primary ratings criteria, but editorial opinions are also included to ensure alignment with The Motley Fool’s credit card philosophy. The Motley Fool receives compensation from some credit card advertisers who provide products and services to help individuals improve their financial lives. It’s one way we make money. See our advertiser disclosure page for additional details.